Undocumented own U.S. homes, pay billions in taxes

By Robert Hennelly

February 29, 2016 / 5:00 AM
/ MoneyWatch

A substantial percentage of undocumented immigrants in the U.S. pay billions in taxes annually and own their own homes, according to a 50 state report from the Institute on Taxation and Economic Policy.

"Contrary to a lot of myths out there, this study shows that the undocumented pay a very significant share of their income to state and local taxes," Meg Wiehe, a co-author of the report told CBS MoneyWatch. "They are also establishing roots here because they are committed to their communities."

One in three of the nation's undocumented families own a home, according to the ITEP report. States such as Idaho and New Mexico report undocumented ownership rates as high as 46 percent. Those statistics are based on research done by the Migration Policy Institute and data collected by the U.S. Census's American Community Survey.

More Mexican immigrants leaving U.S. than arriving

The ITEP analysis estimates that the 11 million-plus undocumented immigrants in the U.S. have a 50 percent tax compliance rate, which nets local and state governments $11.6 billion annually. "The undocumented are actually paying a higher percentage of their income toward local and state taxes than the people in the top 1 percent," said Erika Nava, a policy analyst for New Jersey Policy Perspectives, which works with ITEP.

According to ITEP data, undocumented taxpayers paid 8 percent of their income on state and local taxes, compared to 5 percent for the top 1 percent. "Our study estimates that the undocumented households are also remitting 10 percent of what they make here in the U.S. back" to their country of origin, said Wiehe.

In 2013, analysts at the Social Security Administration calculated that in 2010 undocumented immigrants had paid $13 billion into the system and were making on average $34,000 a year at the time. From 1996 to 2003, undocumented workers paid a combined $90 billion into both Social Security and Medicare.

Since 1996, immigrants who didn't qualify to get a Social Security card numbers have been able to apply for an Individual Taxpayer Identification Number (ITIN) from the IRS. ITINs were originally granted to foreign citizens who were active investors in the American real estate market.

With an IRS ITIN number, undocumented residents can legally open a bank account and apply for mortgage financing and close on a real estate transaction.

ITEP has conducted the same survey in 2013 and 2015, and noted that as many as 400,000 undocumented residents returned to their country of origin, which reduced slightly the amount of tax revenues collected by local and state governments.

ITEP projects that immigration reforms proposed by President Obama in 2012 and 2014 would potentially add more than $800 million of dollars in state and local tax revenue.

"Regardless of the politically contentious nature of immigration reform," said Wiehe, "the data show undocumented immigrants greatly contribute to our nation's economy, not just in labor but also with tax dollars."

Still, expert opinion remains sharply divided on the impact of the undocumented on the U.S. economy.

While analysts at the conservative Heritage Foundation concede undocumented immigrant households do contribute tax revenue, they make the case that what they contribute is far outweighed by what their presence here in the U.S. costs taxpayers.

"In 2010, the average unlawful immigrant household received around $24,721 in government benefits and services while paying some $10,334 in taxes," according to Robert Rector and Jason Richwine in their analysis for the Heritage Foundation.

"This generated an average annual fiscal deficit (benefits received minus taxes paid) of around $14,387 per household," their analysis said. "This cost had to be borne by U.S. taxpayers. Amnesty would provide unlawful households with access to over 80 means-tested welfare programs, Obamacare, Social Security, and Medicare. The fiscal deficit for each household would soar."

While the expert debate over this hot button issue has raged for years, Pew Research Center polling suggests American public opinion has shifted greatly since the early 1990s. In a 2015 poll, 45 percent of those surveyed expressed the opinion that immigrants were a net benefit for the U.S. versus 37 percent who felt their presence had a negative impact.